Portformer Methodology - Networks

Portformer Methodology

Replacement Quality Score

The power of the Portformer Replacement Quality Score lies in its ability to quickly and clearly summarize thorough quantitative comparisons between ETFs, Mutual Funds, and portfolios.

This metric results from comparing millions of strategies* through machine learning, then ranking the best according to fees, returns, drawdowns, and more. The Replacement Quality Score represents a breakthrough in investment research that saves financial advisors time and helps grow their AUM.

What It Means

Portformer Replacement Quality Score is a quantitative expression of how much our Best Alternative fund or portfolio improves on our chosen fund or portfolio. It ranges from 1 to 100.

A score of 99 indicates Portformer has found a near-perfect Best Alternative with lower fees, higher returns, lower drawdowns, and less use of capital than the original strategy.

Scores from 85 to 99 are good to excellent, suggesting significant benefits in several measures.

A score of 70 or below indicates the Best Alternative strategy is either not similar to the original strategy or underperforms in key ways.

How It’s Calculated

According to our methodology, Replacement Quality Score is the average of four Subscores:

  • Consistent: how stable the relationship between the strategies is over time;
  • Complete: the similarity of the return types between them;
  • Concise: the simplicity of the Best Alternative strategy; and
  • Confident: the expected relative outperformance of the Best Alternative.

Learn More about Portformer Methodology

Download our two-page PDF to learn more about our unique fund intelligence platform.

Sean Kruzel

Based in Boston, Sean is a portfolio manager, MIT grad, and founder of Portformer. When he’s not investing or programming, he’s probably sharpening his skis for the next icy, New England snowstorm. Check out his full bio here: https://www.portformer.com/our-team

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  • Workflows & implementable insights — to elevate each step of the advisor/client experience

    Use our head-to-head Replacement Scores™ to quickly create client proposals, discover funds, improve model portfolios, and monitor investment plans